Metaprinter Interview With CSM Editor John Yemma Discussing Newspaper Business Models

Regarding this post and his comments, Robert Ivan conducted an email interview to let John Yemma state his case.

RI: We seek to interview any person or company doing innovative things in new media or traditional media. We prize innovation here at metaprinter and encourage media organizations to come on and trumpet their achievements. The goal of the interview is to find out a little bit more information than what can be found already online or in print.

JY: Excellent idea. And good for you for seeking that information via interview.

RI: I’m not a journalist. However, some recent interviews I conducted were with Jimmy Leach, Editorial Director for Digital at The Independent and Alan Murray, Deputy managing editor and executive editor, online for The Wall Street Journal.

John, my intention with the very first post was commentary and analysis of the video interview. I am sorry it displeased you so much. I found that video through Google while researching information regarding newspaper business models. As I said in that post, I admire your consideration in utilizing diverse revenue streams, but I am concerned that they are unsustainable because they rely on:

JY: Robert, it only displeased me because it didn’t seek answers to specific questions. In that video that you cite, Len Witt was asking specific questions to which I was giving specific answers. It isn’t logical to expect that all of your questions would be answered by my answers to Len. At any rate, we’re past that now since you’re asking specific questions and I’m responding below. Peace.

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RI: The CSM endowment (can you take out $7million a year out AND reinvest for growth? (shade tree idea))

JY: I’m not sure where the “$7 million a year” figure comes from. I suspect it is derived from a shorthand response to Len. Let me go through our plan right here. I’ll stipulate that it won’t be easy to achieve our goal, especially not in this industry or this economy, but this is not a seat-of-the-pants plan.

Our intention is to decrease the church’s subsidy by about $10 million over four years. It would move the subsidy from $13.3 million in the current fiscal years to $3.8 in FY13. In the first year, we take out some fixed costs (about $3.8m in print production, distribution, and other daily print costs) but we lose subscription revenue (going from daily @ >$220/year in subscription to weekly @ $89/year). We also reduce our staff by about 10-15%. This pains me as an editor, but there will be some labor savings in going from daily to weekly in print. Cost reduction and revenue reduction essentially balance in year 1 of our plan.

So where’s the investment for growth? We free human resources on both the editorial and the publishing side. No more five-day-a-week print drill. Editorial resources are an $11m resource that can be reallocated to the Web-first-plus-weekly-print strategy: That’s 80 to 90 journalistic employees. Freed from daily print, our staff can more or less continuously update our site, CSMonitor.com. That means — in journalistic terms — more enterprising, relevant, and timely posts. These news posts will both be scraped by aggregators (and others who value original news reporting) and will energize our site. In business terms, this is called acquisition and retention. In a print-first model, resources have to go into the print publishing process first. Our new model is Web-first.

We already know that timely, relevant posts build traffic. I don’t say that lightly; we have done specific experiments. Our goal is to increase traffic five-fold — but again, Robert, this is over five years. Whether you use comScore/Nielsen numbers or our internal Omniture numbers, we are targeting a five-fold increase. It won’t be easy, but we’ll have resources dedicated to make it happen.

Going forward (and remember, any multi-year plan has to be adjusted for reality along the way, unless you are a Stalinist), we’ll need that growth in Web traffic to achieve our revenue goals. We’ll also need growth of our print weekly’s subscriber base. Print daily circulation stands at 50,000. We expect an 85 percent conversion rate to print weekly. Again, you may question this, but I assure you this is a number that was developed after careful consideration. Forgive me if I don’t unpack all the reasoning for you.

We then think we can modestly grow our circulation over the next next four years, achieving modest growth in circ. revenue plus ad revenue. We have developed a good publication. We know that the weekly print market is difficult — as difficult as daily print — so we are doing this with the full knowledge that it will take work and effort. But our circulation, marketing, and advertising staff is very skilled, committed, and not being decreased.

So the investment for growth is the human resources we put into this strategy. Aggregators value our content. So to recap: More smart journalists posting more smart journalism online more hours of the day should build traffic. A more energetic site should increase retention. A good print weekly publication should, given our reputation and content, grow, even if modestly. None of these are shoot-the-moon ideas.

RI: Cash infusions from the church (is the money offered to you independent of the church’s or CSM’s performance? If not, how do you measure and prepare for that performance?

JY: The church has subsidized the Monitor for most of the 100-year life of the Monitor. Obviously, they are committed to it. To echo your very wise Warren Buffett quote, they planted the tree that has produced our shade. That includes an established and respected name, a carefully developed journalistic corps, and a clear mission to report global news accurately, humanely, and without sensationalism. We started in 1908, during the heyday of yellow journalism, because our founder, Mary Baker Eddy, believed the world needed journalism that, as she put it, would “injure no man, but bless all mankind.”

A five-year plan to decrease the subsidy is evidence of the church’s continued commitment. They don’t want to do this overnight. But it is a laudable goal for the long-term health of the Monitor and the continuation of journalistic independence. Shareholders of public companies in general do not provide long-term commitments like that. Family-controlled companies like the NY Times have a little more stability because of that commitment. But as the Wall Street Journal showed, even families like the Bancrofts at some point can decide to get out of the business.

Also, remember, we are a non-profit. We just need to reachable sustainablity, which is what Len was wanting to understand, since he is interested in the non-profit model of news gathering and dissemination.

If we don’t make our revenue targets, we have to cut costs. And, yes, cutting costs will make it harder to achieve revenue targets. That’s a story as old as the first business that ever ran into headwinds. We’ll know how we are doing relative to the plan outlined above by the middle of 2009. I’m not prepared to detail contingency plans, since real-world conditions, institutional considerations, and other factors will come into play. Suffice it to say we are going into this with our eyes wide open. We are measuring performance at every level — traffic, circulation, revenue, costs.

RI: Unknowable projected advertising revenues (display cpm rates falling, news sites are currently at $0.36)

JY: Yes, we can see what kind of economy we are in and that CPM rates are falling. I didn’t say this was going to be easy or that the future is knowable. We are looking not just at the several revenue sources I’ve outlined (print- and web-ads based; print subscriptions) but at others as well. I’m not prepared to detail them, but sober management is about looking at opportunities and risks and knowing that economic conditions are dynamic. Product, by the way, is not a neutral variable in this equation. It is fashionable among new-media folks to think of news as a mere commodity. But quality of content and brand make a difference (see the WSJ and the Economist).

RI: Unknowable subscription growth rates. (Online information indicates CSM has been losing circ. How will you reverse this long-term trend?)

JY: As stated above, we are positing a very modest circulation growth rate (85,000) after recovering from that 85% print-to-weekly conversion process. We are also changing print models from daily to weekly. And, again, we have developed a good product. You may still consider all of these “unknowable” factors. I hope you have a little greater understanding now.

RI: My biggest concern is not that CSM business model is uniquely untenable but that generating sustainable revenues are the dilemma of all newspapers moving to the Internet. This explanation from a previous post of mine bears repeating.

JY: You’re right that this is the big dilemma.

RI: In The Great Unbundling, Nicholas Carr explains how (in the absence of online publishing) bundled content in a printed newspaper created a product that was more valuable than the sum of its parts. Online however, the bundling concept falls apart because readers are not exposed to all ads on a site (as they potentially are in print). Online readers target specific articles or sections. This is why the most trafficked newspaper website in the nation, NYT.com, generates ~$350million online while Cnet.com which has half the web traffic generates $450million!

This is the publishers’ and editors’ dilemma. How to generate sustainable revenues by monetizing online journalism? So far, no one can do it. Many smart people, my self included, are working on models. Playing devil’s advocate (do you do that at CSM? Just Kidding!) Absent that model, the only other thing that can change in the equation is the journalism. We are seeing this now with the explosion of online communication models. Blogging, Twitter, Link Sites, News Aggregators, Social Networking Sites, Community Forums, Wikis, many of these sites are economically sustainable through various revenue streams.

JY: Robert, it’s not true that “no one” can “generate sustainable revenues by monetizing online journalism.” Slate is profitable. Politico and Huffington Post are close if not fully in the black. Web units at some organizations post enough of a contribution margin to their parents that you can estimate the costs of a modest staff. Although we are not Web-only (remember our weekly), I told Len in the hypothetical question he posed that I imagine $6m was the sustainable Web-only cost for a strong international news organization. Can the traffic generated on $6m in costs bring in $6m in revenue? That is an embedded goal in our strategy.

On your secondary point: We are using most if not all of these Web 2.0 tools. Some of sites that employ them are economically sustainable. Some are not. Just because they are new doesn’t mean they are going to succeed in the long run. A lot is changing in the equation of journalism. I thought, for instance, that some of the Twittering from Mumbai was useful. But a lot of it — like most, excuse me, blogging — is derivative. The noise to signal ration is very high. Once past the novelty phase — and perhaps during a real news cycle like a 9/11 — professional journalism using these and other tools (including, yes, traditional ones) proves its worth. Let’s consider Mumbai again. During the event, Twittering seemed somewhat interesting. But now trying to discover the forces behind the attack, the implications for India-Pakistan relations, the US foreign policy angle, and hundreds of other very important and interesting who-what-when-where-why questions is not being done by Twitterers. It is being done by journalists who are sifting wheat from chaff, logic from hysteria, fact from fiction, traveling to Kashmir, etc. My goal, your goal, and the goal of editors, publishers, and thinkers everywhere is to ensure that that kind of information continues to be developed.

RI: If we are to believe Marshal McLuhan that, “the medium is the message”, then maybe traditional print journalism cannot be sustained online (in the absence of print advertising and print circulation revenues)?

JY: I agree that print journalism online will have to change. We have to do with less, we have to be smarter about the business, we have to work for every unique visitor and page-view. Original journalism costs money. A Baghdad bureau requires war-zone insurance, security, and a number of other high cost necessities so that we can get real knowledge of the world from there. As you say, many smart people, yourself included, are working on models. The point is not to believe that McLuhan’s very insightful description is prescriptive. The point is to continue working on those models. I’ve detailed ours here.

RI: There is a lot to dissolve here. I’ve read your bio. You are an accomplished person with a lifetime of achievements in journalism and I respect that. I look forward to your answers and at that point I will post this complete exchange on my site and in the interview section on my blog. Answering these questions can only serve to make the industry better. Please state your case for economic sustainability keeping the ordered list above in mind. Have fun with it and go nuts!

JY: So there you have it, Robert. I’ve honestly laid out our model. It took you time (cost) to ask and me time (cost) to answer. That’s journalism.

-John

RI: This was fun. I thank you for the time to come on and state your case. Obviously John and I disagree on some points, but the disagreement only serves to help create a more robust new newspaper business model.

-Robert Ivan